Between shareholder-friendly stocks expected to underperform the market and highfliers that pay little heed to their owners' interests, you'll find top-flight companies that also treat their shareholders with respect.

Institutional Shareholder Services -- the big name in corporate proxies -- measures how well a company behaves in as many as 63 categories covering four broad areas. Moreover, each company is scored relative to its market index and its industry group. It assigns the stocks a rating that it calls its corporate governance quotient, or CGQ.

Some evidence supports the notion that companies with weaker governance have higher risk, decreased profitability, and lower valuations. We'll look at stocks that Motley Fool CAPS investors have marked to outperform the market and that also sport above-average CGQ scores, either in their index group or among industry peers.


CAPS Rating
(out of 5)

Index CGQ Ranking*

Industry CGQ Ranking*

Ceradyne (NASDAQ:CRDN)




Dynamic Materials (NASDAQ:BOOM)




Oncothyreon (NASDAQ:ONTY)




Portfolio Recovery Associates (NASDAQ:PRAA)








Sources: Yahoo! Finance, Motley Fool CAPS.

*Relative placement when compared with companies in index or industry. Higher is better.

Although finding good companies and holding them for the long term is one of the greatest secrets to success in investing, there are many factors an investor should consider, and how well a company treats shareholders shouldn't be least among them. View these rankings as a way to gauge how these businesses stack up against one another relative to their shareholder policies.

Go to the head of the class
Investors began showing confidence in biotech Oncothyreon late last year, ahead of the announcement that German pharmaceutical company Merck KGaA would launch late-stage clinical trials on Stimuvax, Oncothyreon's leading cancer therapy. That leap of faith proved fortuitous, because shares of the biotech are up 16% since November.

Sure, biotechs and their partners often get a bounce from announcing new trials, but there's every reason to believe these two are onto something big. Merck describes Stimuvax's results with lung cancer as nothing short of "brilliant," and because of its good side-effects profile, it has full confidence in its potential to treat breast cancer as well.

Although phase 3 trials have been known to trip up many promising drugs -- Pfizer (NYSE:PFE) recently missed on  a cancer treatment, and there was the train wreck of Gilead Sciences' (NASDAQ:GILD) blood pressure medications -- Merck genuinely seems convinced of the potential for Stimuvax.

Oncothyreon remains under the radar of most investors, with fewer than 100 CAPS members having rated the biotech. But of those who did, 92% believe it's going to outperform the market, and I'd be willing to wager they think it's going to be by a wide margin, particularly if Stimuvax continues its streak of "brilliance." Why not head over to the Oncothyreon CAPS page and offer your opinion on this promising drug developer?

A Foolish quotient
Many factors go into whether a stock is a buy or a sell, but do corporate governance policies enter into your equation? It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.

Pfizer is a Motley Fool Inside Value choice and VASCO Data Security International is a Stock Advisor recommendation. Dynamic Materials and Portfolio Recovery Associates are Motley Fool Hidden Gems recommendations. The Fool owns shares of Dynamic Materials and Portfolio Recovery Associates. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool's disclosure policy is a capital idea.